Global Markets Overview - 12/02/2011

U.S. Stocks

U.S. stocks were little changed in afternoon trading Thursday, a day after a blowout rally, as headlines from Europe kept traders on the defensive but strength in the technology sector limited losses.

The Dow Jones Industrial Average shed 6 points, or 0.1%, to 12049 recently, shaving off a sliver of the previous session's 490-point surge.

The Dow is coming off its biggest one-day gain since March 23, 2009, fueled by global central banks' effort to make it less costly for European banks to borrow U.S. dollars.

The Dow added 814 points over the last three sessions. The Standard & Poor's 500-stock index lost a fraction to 1247. The Nasdaq Composite edged up 9 points, or 0.3%, to 2629 recently.

After falling in afternoon trading, stocks turned slightly higher after French President Nicolas Sarkozy said his country and Germany would push for European Union treaty changes to preserve the region's monetary union and to protect the euro.He promised detailed proposals to change the EU treaty jointly with German Chancellor Angela Merkel in Paris Monday.

The remarks roughly coincided with hawkish-sounding commentary on Spain's budget situation by a Bank of Spain official. Stocks had fallen to session lows earlier in the afternoon after Sarkozy painted a grim picture of the way out of Europe's sovereign-debt crisis and amid reports that Germany will continue to oppose common euro-zone debt, seen by many market participants as a possible solution to the continent's sovereign-debt crisis.

Central bankers' coordinated action Wednesday was widely seen as an effort to give European leaders more time to solve the sovereign-debt crisis. Financial stocks fell the hardest in the S&P 500, hit by Massachusetts Attorney General Martha Coakley's lawsuit against five national mortgage lenders.

The suit alleged that their foreclosure practices were unlawful and deceptive. J.P. Morgan Chase, one of the companies named in the suit, fell 1.7%, one of the weakest blue-chip stocks. The technology sector was a bright spot. Apple gained 1.6% after J.P. Morgan analysts raised earnings and revenue estimates for the iPad maker, predicting stronger iPhone sales amid what they said were no signs of a plateau effect in consumer demand.

Earlier, stocks got some support from factory data showing U.S. manufacturers swimming against a tide of contracting activity elsewhere in the world, but a weaker-than-expected U.S. weekly jobless-claims report weighed on sentiment .

European Stocks

European stock markets dropped Thursday, snapping a four-session winning streak, as investors eyed mixed results from Spanish and French bond auctions as well as a downbeat survey of the euro zone's manufacturing sector.

The Stoxx Europe 600 index fell 0.7% to end at 238.49 after closing higher in the previous four trading sessions. The general tone for markets on Thursday was one of consolidation. The German DAX 30 index fell 0.9% to 6,035.88, led by a 2.9% fall for drug group Bayer AG and a 2.5% drop for Commerzbank AG.

The French CAC 40 index dropped 0.8% to 3,129.95, weighed by financials. Credit Agricole SA fell 3.8% and Societe Generale SA fell 3.2%. Shares of automaker Renault SA slipped 0.2%, erasing earlier gains. Morgan Stanley lifted the stock to overweight from underweight.

Putting the focus squarely back on debt issues, the Spanish government sold its targeted amount of bonds but saw borrowing costs rise, while France saw its 10-year borrowing costs decline at an auction.

Observers also noted the yield on the German one-year government bond has turned negative for the first time, which means jittery investors are still willing to pay more for the security and liquidity of loaning money to Germany. Data, meanwhile, showed activity in the euro-zone manufacturing sector contracted at the sharpest pace in 28 months in November.

The U.K.'s FTSE 100 index fell 0.3% to 5,489.34, as bank shares posted losses. Lloyds Banking Group PLC dropped 3.3% and Barclays PLC fell 1.7%. Shares of Vodafone Group PLC rose 0.6% after news it has bought European IT and communications group Bluefish Communications. Luxury firm Burberry Group PLC had another strong day of trading, up 3%. Shares of Kingfisher PLC jumped 2.2% after it reported a 4.6% rise in third-quarter group sales and a 1.3% rise in comparable sales.

Asian Stocks

Asian stock markets joined in a global rally Thursday, with Hong Kong shares notching their biggest intraday rally in nearly two years, as investors welcomed a move by major central banks to slash dollar credit costs in Europe, as well as monetary policy easing in China.

Hong Kong's Hang Seng Index jumped 5.6% to 19002.26, after earlier surging 5.9%, marking the biggest intraday gain since April 2009. Japan's Nikkei Stock Average rose 1.9% to 8597.38, South Korea's Kospi finished 3.7% higher at 1916.18, while China's Shanghai Composite Index climbed 2.3% to 2386.86, and India's Sensex rose 2.2% to 16483.45.

As the risks to global funding diminished, banks moved higher. In Japan, Mitsubishi UFJ Financial Group rose 3.1%, and Daiwa Securities Group climbed 4%. Gains were more pronounced in Hong Kong, where the Bank of China gained 10%, China Citic Bank rose 11%, and Agricultural Bank of China added 9%.

Late Wednesday, the People's Bank of China cut its reserve requirement ratio for large banks for the first time since December 2008, following a modest easing for small rural banks last month. Chinese real-estate firms were also particularly strong after the policy easing, with China Resources Land jumping 10%, and Agile Property Holdings soaring 15%. Among other major gainers Thursday were resource shares, with Jiangxi Copper up 13% and Cnooc up 9.4% in Hong Kong.


Base metals closed mostly lower on the London Metal Exchange Thursday, softening as the dust settled on the previous session's sharp rally. At the close, flagship three-month copper was 1.2% lower at $7,789 a metric ton. Zinc, on the other hand, has finally broken out of its tight trading range, and an advance to $2,130/ton is now in sight, he said. Zinc closed Thursday's session at $2,044.50/ton, down 1.2% on the day.

Crude oil futures were modestly weaker Thursday, after erasing slim early gains on a disappointing U.S. weekly jobless claims report. The Labor Department said new applications for unemployment benefits rose for a second straight week, gaining 6,000 to 402,000 in the week ended Nov. 26.

Economists had called for a decline of 3,000. Light, sweet crude oil for January delivery was down 16 cents at $100.20 a barrel on the New York Mercantile Exchange. Gold futures settled lower after touching fresh two-week highs, as investor enthusiasm over central banks' plans to cut the cost of borrowing dollars faded. Gold for February delivery, the most actively traded contract, fell $10.50, or 0.6%, to settle at $1,739.80 a troy ounce on the Comex division of the New York Mercantile Exchange.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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